2022 (1) TMI 558 - SC - Indian Laws

Supreme Court reinstates arbitrator's award, overturns High Court decision

The Supreme Court allowed the appeal, quashing the High Court's order that set aside the arbitration award. The Court reinstated the arbitrator's award ... Scope of appeal under Section 37 of the Arbitration and Conciliation Act, 1996 - prohibition on re-appreciation of merits in Section 37 appeal - setting aside arbitral award only where contrary to public policy of India - challenge to arbitrator's jurisdiction not permissible where earlier objections were overruled and not appealedScope of appeal under Section 37 of the Arbitration and Conciliation Act, 1996 - prohibition on re-appreciation of merits in Section 37 appeal - setting aside arbitral award only where contrary to public policy of India - High Court exceeded its jurisdiction under Section 37 by entering into and re-appreciating the merits of the arbitral award and setting it aside. - HELD THAT: - The Court held that an appeal under Section 37 confers a limited jurisdiction on the High Court and does not permit the court to decide the dispute afresh as if it were an appeal from a trial court. An award is liable to be set aside under Sections 34/37 only if it is contrary to the public policy of India - namely, if it is against the fundamental policy of Indian law, the interests of India, justice or morality, or is patently illegal. Applying these principles, the Court found that none of these exceptional grounds applied on the facts, and that the High Court impermissibly entered into the merits to reverse the award, thereby exercising jurisdiction not vested in it under Section 37. [Paras 7, 8, 9]High Court's quashing of the award on merits was beyond its jurisdiction under Section 37 and is unsustainable; the award is not shown to be against public policy and is to be restored.Challenge to arbitrator's jurisdiction not permissible where earlier objections were overruled and not appealed - jurisdictional objections under Section 16 - Respondent could not, in the present appeal by the original claimant, reopen the question of the arbitrator's jurisdiction which had been overruled by the High Court and not separately appealed by the respondent. - HELD THAT: - The Court noted that the High Court had considered and overruled the jurisdictional objection to the arbitrator, and the respondent did not prefer any appeal against that finding. Having been finally dealt with earlier, the respondent could not resurrect that contention in the current proceedings brought by the original claimant. Consequently the challenge to the arbitrator's jurisdiction was not open in this appeal. [Paras 6]Jurisdictional objection to the arbitrator, having been overruled earlier and not appealed, cannot be raised in the present appeal and is not a ground to sustain the High Court's order.Final Conclusion: Appeal allowed; impugned judgment and order of the High Court quashed and set aside; the arbitral award and the order of the Additional District Judge under Section 34 restoring the award are hereby restored. Issues:Appeal against High Court's order setting aside arbitration award under Section 37 of the Arbitration and Conciliation Act, 1996.Analysis:1. Background and Facts:The dispute arose between the parties regarding a contract for the supply of Aerated Cold Drinks at Tourist Complexes. The arbitrator awarded the respondent to pay a sum, which was challenged by the appellant. The High Court set aside the award, leading to the present appeal.2. Jurisdiction of the High Court:The appellant argued that the High Court exceeded its jurisdiction under Section 37 of the Arbitration Act by delving into the merits of the claim awarded by the arbitrator. The High Court's role in such appeals is limited, and it cannot act as a trial court.3. Grounds for Setting Aside an Award:The Supreme Court clarified that an award can only be set aside if it violates public policy, fundamental Indian law, national interest, justice, morality, or is patently illegal. None of these exceptions applied in this case. The High Court erred by entering into the merits of the claim, akin to a trial court's function.4. Challenging Arbitrator's Jurisdiction:The respondent's objection to the arbitrator's jurisdiction was overruled by the High Court, and no appeal was made against it. Therefore, the respondent could not challenge the arbitrator's jurisdiction in the present appeal.5. Decision and Outcome:The Supreme Court allowed the appeal, quashing the High Court's order and restoring the arbitrator's award and the Additional District Judge's order. The High Court's interference in the merits of the claim was deemed unsustainable, and the appeal was allowed without costs.